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Despite strong population growth over the last two years, the latest building approval figures from the Australian Bureau of Statistics (ABS) show that the number of dwellings approved for construction is not keeping pace with demand.
According to the ABS, in 2010-11, the number of dwellings approved for construction throughout Australia was 168,172. This is compared to 158,762 – the total number of dwellings approved for construction in 2012-13.
A lack of consumer confidence, tighter lending requirements as well as rising land prices have combined to put a break on the growth in new housing construction approvals, despite the pressure of a rising population.
According to a report by Goldman Sachs on the shortage of housing in Australia, Australia’s population is currently growing at its fastest since 1969, rising by 2.1 per cent year on year, mainly due to rising net migration. The report, “A Study on Australian Housing: Uniquely positioned or a bubble”, suggests that construction of new homes is not keeping pace with population growth rates.
The report points out that in the 20 years between 1985 and 2005, Australia built an average of 150,000 homes each year for every 240,000 increase in population. This ratio translates to 60 per cent of a new home constructed for each new person. In recent years, this trend has significantly changed. By mid-2009, the population had to rise by 480,000 in order achieve the 150,000 new homes constructed in a year. For each new person, only 30 per cent of a home was constructed, and in NSW the figure was even lower at only 20 per cent.
According to DEPPRO, the growing shortfall in housing may be met by growth in new apartments, which are more affordable than standalone houses and faster to construct. DEPPRO has already found that more clients are choosing new apartments over freestanding houses for investment purposes.
However, people who buy apartments and units for investment purposes still remain the most common group of investors to fail to obtain their full tax depreciation entitlements. These investors fail to understand that the tax benefits from accurate and legitimate property depreciation are just as important as rental income.
Paul Bennion, Managing Director of DEPPRO said regardless of the type of investment property purchased, first time investors should always complete a tax depreciation schedule with a qualified and authorised company as soon as possible after settlement.